Unexpected Account Shutdowns At Major Banks Lead To Frustration, Accusations Of Discrimination

Customers of JPMorgan Chase & Co JPM and Citigroup Inc C are grappling with the sudden closure of their bank accounts.

What Happened: Around 200 ex-JPMorgan Chase customers reached out to The New York Times to voice their grievances about their accounts being closed without proper justification.

According to the report, the closures are part of a larger security effort aimed at deterring criminal activities such as fraud, terrorism, money laundering and human trafficking.

Despite the intention to combat illicit activities, these sweeping closures have inadvertently ensnared numerous legitimate customers and businesses, leaving them in difficult financial positions.

The process of releasing funds after account termination is often protracted, adding to the customers' distress. Banks, however, are not obligated to disclose the specifics regarding the frequency or the number of accounts being terminated.

Also Read: Here's How $78 Billion Exited The US Banking System In Just One Week

Speaking to The New York Times, JPMorgan Chase's spokesperson Jerry Dubrowski commented that the bank's actions comply with its regulatory obligations, while acknowledging the potential frustration for clients.

“We want to build long-term relationships with our clients, which is why accounts are closed only after appropriate review and consideration of the facts,” Dubrowski said. 

Additionally, the outlet reported that JPMorgan has been accused of terminating accounts based on customers' religious or political affiliations. 

Similarly, Citibank customers, like Caroline Potter, have faced abrupt account closures without clear explanations. Potter told the newspaper that she suspects her account closure might be linked to her husband's business association with the cannabis industry. Citibank refrained from commenting on individual cases, according to the paper. 

“It felt like there was this secretive department, and anyone who wasn’t in that department didn’t even know about it,” Potter said.

Amid these account terminations, there's been an uptick in the number of suspicious activity reports filed by banks to the government, though only a small percentage have led to law enforcement action.

Related stocks such as Wells Fargo & Company WFC and Bank of America Corporation BAC, along with ETFs like Financial Select Sector SPDR Fund XLF and Vanguard Financials ETF VFH, may also be impacted by these banking practices.

Now Read: US Banks Witness Whopping $100 Billion Deposit Drop In Just Three Weeks, Fed Survey Raises Alarm

This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.

Photo: Shutterstock